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Comparing different data descriptors in Indirect Inference tests on DSGE models

Minford, Anthony ORCID:, Wickens, Michael ORCID: and Xu, Yongdeng ORCID: 2016. Comparing different data descriptors in Indirect Inference tests on DSGE models. Economics Letters 145 , pp. 157-161. 10.1016/j.econlet.2016.06.016

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Indirect inference testing can be carried out with a variety of auxiliary models. Asymptotically these different models make no difference. However, in small samples power can differ. We explore small sample power with three different auxiliary models: a VAR, average Impulse Response Functions and Moments. The latter corresponds to the Simulated Moments Method. We find that in a small macro model there is no difference in power. But in a large complex macro model the power with Moments rises more slowly with increasing misspecification than with the other two which remain similar.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce
Uncontrolled Keywords: Indirect Inference; DGSE model; Auxiliary models; Simulated Moments Method
Publisher: Elsevier
ISSN: 0165-1765
Date of First Compliant Deposit: 23 November 2016
Date of Acceptance: 12 June 2016
Last Modified: 05 Nov 2022 18:44

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